ASX Share Trading – What You Need To Know
So you want to increase your wealth by investing in ASX Shares? Start out on the right foot and you could eventually supplement the income from your job. But make one of a few fatal mistakes and you could see yourself right out of the market, never to trade again.
What do I mean? Let me give you an example: Let’s say you started putting $150 a month into ASX Shares in 1980. That’s around $5 a day. It earns an average of 15% per annum over the years including dividends. If you re-invested all your returns, today it would be worth over one million dollars – $1,038,490 to be exact.
But many people when first starting out make a few fatal mistakes – maybe they lose a little (or a lot) of money. And they stop investing. They get scared out of the market. And because of this they lose out on all the rest of the gains over the years – they lose out on that million dollars we just discovered.
So how can we make sure we don’t make the same mistake trading ASX shares? Your Trading Plan is the answer, and although it can be simple, it is the most powerful tool you will use in the market. If you haven’t got one, you shouldn’t be trading. But where do we start?
Well, if you take 100 different people, you will probably get 100 different trading plans. We are all individuals, and we all have different thresholds for risk. Therefore a good place to start with a trading plan is the following:
1: Your Rules for Buying and Selling – these are the rules you have tested that determine when you buy and when you sell a share. Whether it is buying for fundamental reasons, like company earnings or book price, or whether it is for technical reasons like crossing a trend line or Dow theory it doesn’t matter: so long as it suits you.
2: Your Money Management Rules – these are the rules for how much you will invest in a single position, and then in your total positions. This means you decide how much is right for you when putting money in a share. Obviously, if you put too much into one share on the ASX, you will lose all your money if it disappears. But also, if you put your money into too many shares it will be hard for you to outperform the market. Usually between 6 and 12 positions is optimum.
Having these in place will set you on your way to a solid start in ASX Shares.
Visit www.asxmarketwatch.com for more information on ASX Shares, including a free course and free market research on Australian Stocks.






































